Leo Varadkar is clearly anxious to avoid a repeat of the water charges debacle when it comes to tackling climate change through carbon taxes. Above all, he wants to ensure that the entire Irish political system does not have to endure such political contortions again.
It is no easy task. While the Taoiseach is enough of a realist to know he must build a broad consensus on the issue, he also recognises that time is of the essence and that we have to get serious about having an increasing levy on fossil fuels, such as coal, oil, gas and peat. The current tax on the use of fossil fuels is levied at €20 a tonne. Recent research by the Economic and Social Research Institute indicate a massive rise would be required in the next decade — to €300 a tonne — if Ireland is to meet its commitments to reducing CO2.
Varadkar is fielding a lot of flak at home for his handling of this critical issue. The fact that there was not even a modest increase in carbon tax in last October’s Budget, shocked environmentalists, who railed against Ireland’s dismal track record so far. The figures are, indeed, startling. Per capita, Irish people generate 13.7 tonnes of carbon a year, compared with an EU average of 8.7 tonnes.
At the same time, Mr Varadkar is being praised abroad for attempting to build an all-party consensus on the issue and by promising to put money collected from the environmental tax back into people’s pockets.
“I am of the view that carbon tax is there for a reason, it’s an environmental tax designed to change behaviour,” said the Taoiseach. “It’s not designed to take money out of your pocket.”
Support for the Taoiseach has come most notably from CapX, a British news website founded by the London-based Centre for Policy Studies, with writer Joe Ward contrasting his approach with the mistakes of French President Emmanuel Macron, noting that they both entered office in the summer of 2017, with Macron riding a wave of purpose and popularity.
“Nearly two years on, following a bruising encounter with the
protesting about French fuel taxes, it is Varadkar who could teach his French counterpart a thing or two about how to introduce a market-based solution to addressing climate change,” writes Ward.
The question though is how to gain broad agreement on a tax increase that will not only bite but will also change behaviour. Mr Varadkar could do worse than look at the approach taken in Canada where householders actually profit from carbon taxes. British Columbia introduced a carbon tax in 2008 but cut personal and corporate taxes. The target is an 80% reduction in emissions by 2050.
Sweden has had a carbon tax since 1991, leading to a cut of 25% in emissions while GDP has grown by 60%, proving that you don’t have to choose between a healthy planet and a healthy economy.
Climate change is an enormous and complex problem, without any single silver bullet solution. A carbon tax that is effective and popular is a good start.